Nasdaq Seeks Green Light for Staked iShares ETH ETF: A New Income Frontier

The Nasdaq Stock Market has filed a regulatory proposal to the U.S. Securities and Exchange Commission (SEC) aiming to amend the iShares Ethereum Trust to permit staking of ether held by the ETF. This marks a significant development for institutional investors as the fund would grant exposure not only to ETH price appreciation but also to staking rewards generated on Ethereum’s proof-of-stake network.

The amendment, submitted by Nasdaq on behalf of BlackRock, proposes allowing the Trust to stake some or all of its ether holdings through trusted third-party providers. In return, the Trust would receive staking rewards, which the SEC recently clarified can be treated as earned income rather than securities gains. This regulatory clarity paves the way for traditional financial institutions to gain cash flow streams from cryptocurrency assets.

Institutional Appetite for Staking Expands Rapidly

The SEC's May guidance confirmed that staking rewards received from certain validation activities on proof-of-stake blockchains are considered earned income, offering a tax-efficient path to yield on crypto assets. This has triggered a surge of institutional interest in Ethereum, viewed increasingly as a hybrid between technology equity and digital currency.

Ethereum’s staked supply recently reached a record high, exceeding 29% of circulating ETH. Corporations purchased over 540,000 ETH worth approximately $1.6 billion in the past month alone to bolster treasury reserves. The inflows into Ether-focused ETFs have been impressive, with over $726 million poured into such vehicles just in July. Significantly, the iShares Ethereum Trust, managed by BlackRock—the world’s largest asset manager—stands at the forefront of this institutional staking wave.

Transforming Ethereum Exposure: From Holding to Yield Generation

Previously, the iShares Ethereum Trust did not permit staking or any income-generation activities on the ETH it held. The new proposal seeks to repeal this limitation, allowing the trust to engage staking for some or all of its ETH holdings. Staking would be mediated by custodial arrangements consistent with SEC guidance to mitigate operational and compliance risks.

Partnering with Coinbase Custody Trust and Coinbase as prime execution agent, alongside The Bank of New York Mellon administering cash holdings, the Trust aims to maintain strong operational controls while earning staking rewards. Investors in the ETF would thus gain indirect access to yield on their ETH holdings, blending traditional investment attributes with next-generation blockchain technology features.

This filing for the rule change reflects a move toward greater institutionalization of staking within regulated investment products, potentially broadening the appeal of Ethereum in conservative investment portfolios. The move could lead to greater liquidity and stability in ether securities as it aligns crypto assets with conventional income-generating strategies.